Deal to save Premier Foods close

Premier Foods is on the brink of agreeing new bank loans that will secure the future of the Hovis, Ambrosia and Mr Kipling firm, it has been reported.

Part-nationalised Royal Bank of Scotland and Lloyds are among the lenders expected to renew £1 billion of loans and extend Premier's repayment deadline for a further three years beyond the current 2013.

The St Albans-based company has been brought to the brink by debts incurred on an expansion spree that saw it buy RHM, the firm behind Hovis bread, for £1.2 billion in 2007 and acquire Campbell's UK and Irish business, adding Oxo, Batchelors, Homepride and Fray Bentos, the year before.

According to the report in the Sunday Times, the banks will ask that the proceeds of several disposals result in some repayments before the 2016 deadline. Premier has already signalled the potential sale of some of its brands as it looks to focus on eight "power" brands, which include Oxo and Bisto.

Sarson's vinegar and Hartley's jam are thought to be among the brands on the sale block.

It is understood that the majority of Premier's 28 lenders are supportive of the debt deal, although one or two have reservations which could prolong negotiations for another few weeks.

Premier's shares were 258p five years ago and sunk as low as 3p in November before recovering to 11.25p on Friday, valuing it at £270 million.

It recently embarked on a major television advertising drive as part of more than £50 million of marketing due this year to promote its main brands, which also include Batchelors and Sharwood's.